This post is gonna be weird and long.

I often have weird thoughts that I wish I could put into a book or story. My thought today is about comparative advantage. Comparative advantage is an economic concept that explains why people and countries can specialize into certain areas of work to become more efficient.

For example, in Iceland the cost of electricity is very low, which is why Iceland has attracted a lot of investment in industries that require lots of electricity, such as aluminum smelting. On the other hand countries like Bangladesh have a low cost of labor, which is why labor intensive activities such as clothing manufacturing invest there. It doesn’t make sense for a company to put an aluminum smelter in places where electricity is expensive, nor does it make sense to put a clothing factory where labor is expensive. Iceland and Bangladesh have their own comparative advantages at this moment in time, and that explains their patterns of industry.

Let’s imagine for a moment that there was a fully autonomous colony on the moon. People lived and worked there without needing to import air, water, or food from Earth. They can trade with Earth, but if Earth were cut off they could still make their own goods, just as if our country were cut off from the world we could still make our own food, drink our own water, breathe our own air. Let’s say they use super-future space technology to extract water and oxygen from moon rocks, and grow crops using moon soil.

If there would be such a moon colony, we would assume there would be trade with Earth. Certainly the cost of moving goods from Earth to the moon and vice versa are enormous. But it was once unbelievably dangerous to cross the oceans, and people still did it because the profits were worth it. We would expect that the moon would have some comparative advantage compared to Earth and vice versa, which would make trade profitable. This comparative advantage is the same reason Iceland sells aluminum products to Bangladesh who in turn sells Iceland clothing.

So with all this in mind, I assert that the moon’s comparative advantage would naturally be in large, heavy goods, but not because of the moon itself but because of the journey.

Let me give another example, suppose there is a factory on Earth making steel and a factory on the Moon making steel. Let’s also say the iron and carbon for the steel can be gotten just as easily on the Moon as on Earth. I assert that the one on the Moon has a comparative advantage because of space travel. Sending goods from the Earth to the Moon means having to spend a lot of energy accelerating out of Earth’s thick atmosphere, then also spending energy to slow yourself down for a moon landing. By contrast it takes much less energy to accelerate off the atmosphere-less surface of the moon, and landing on Earth costs far less energy as you can use the atmosphere itself to brake your fall.

So a moon steel factory can send packages of steel to the Earth at a rather low transport cost compared to vice versa. That gives an advantage to the moon steel factory, as if there are shortages on Earth the moon factory can fill them at a rather low cost, while Earth cannot do the same to fill a need on the moon. The transport costs are not symmetric, and they are in the moon’s favor. I would assert that, all else being equal, investment for steelmaking would flow into the moon and out of the Earth.

Of course the “all else being equal” is the rub. Air, water, and food are hard to come by on the moon. Iron and carbon might be easier but all the mining equipment is already here on Earth. We would have to do a lot of work and build a lot of technology to make a moon-base even possible. But in theory economies of scale and future-technology could make it possible and even economical. And at that point it might enter a virtuous cycle due to these asymmetrical transport costs I mentioned. It will always be cheaper to send goods from the moon to the Earth, than vice versa.

It’s just a random thought I’ve had and I want to put it in a work of fiction. In some sci-fi universe, a moon colony is economically sustained by this comparative advantage compared to Earth. But I’ve never gotten the courage to write this story so until now it’s just been an idle thought in my head.